SKANEATELES PAPER COMPANY v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 24 October 1933 |
| Docket Number | Docket No. 21561. |
| Parties | SKANEATELES PAPER COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
James P. Quigley, Esq., for the petitioner.
J. H. Yeatman, Esq., and J. A. Lyons, Esq., for the respondent.
This is a proceeding for the redetermination of a deficiency in income and profits taxes for the year 1917, consisting of a jeopardy assessment in the amount of $25,302.18 and an additional tax in the amount of $545.20.
The issues raised by the pleadings are (1) whether or not the total deficiency asserted for the year 1917 is barred by the statute of limitations; (2) whether the respondent erred in failing to include in the petitioner's invested capital at January 1, 1917, any part of the alleged increase in its surplus account effected through cancellation of its indebtedness of $35,000 to the Oswego Falls Pulp & Paper Co.; and (3) whether or not the respondent erroneously disallowed the entire deduction for depreciation claimed by the petitioner from its gross income for 1917 on that part of the cost of the paper mill and equipment represented by its indebtedness of $35,000. The question of the Board's jurisdiction in this proceeding is also raised by the petitioner in its brief.
FINDINGS OF FACT.
By notices dated April 24, 1926 (Form NP — 1), addressed to "Skaneateles Paper Company, Skaneateles, New York," the respondent tentatively determined a deficiency in that company's income and excess profits taxes for the year 1917 in the amount of $545.20, in addition to rejecting a claim for abatement of a prior jeopardy assessment in the amount of $25,302.18, and by notice dated September 29, 1926 (Form NP-2), addressed to the same company, final determination of the deficiency was made.
The Skaneateles Paper Co. was a New York corporation, organized in 1875 and engaged in the operation of a paper mill at Skaneateles, New York. This corporation was dissolved by operation of law on or about January 31, 1922, as the result of its consolidation with other corporations to form the Oswego Falls Corporation, under and pursuant to the Business Corporation Law of the State of New York.
The original petition in this proceeding was filed November 27, 1927, and on November 12, 1928, an amended petition was duly filed. Each of the petitions was styled "Skaneateles Paper Company, Skaneateles, New York, Petitioner," and was signed "Skaneateles Paper Company, By its sole beneficiary Oswego Falls Corporation, of Fulton, New York, by S. C. Stivers, Secretary." Each of the petitions contained the following statement in paragraph 1 thereof:
The petitioner is Skaneateles Paper Company, a New York State Corporation which, by agreement dated January 30, 1922 and filed in the office of the Secretary of State for New York on January 31, 1922, was consolidated with other corporations to form Oswego Falls Corporation, a New York State Corporation, having its principal office in Fulton, New York, and this petition is filed by the latter as the sole beneficiary of all of the assets and liabilities of Skaneateles Paper Company.
Paragraph 1 of the petitions was admitted by the respondent in his respective answers thereto.
The Skaneateles Paper Co. filed its income and profits tax returns for the year 1917 on March 29, 1918.
An unlimited waiver (corporation), signed Skaneateles Paper Co. and approved by the respondent, was executed under date of February 14, 1921. By this document the company waived "any and all statutory limitations as to the time within which assessments" might be entered, based upon its liability for all Federal taxes imposed for the year ended December 31, 1917, "on its net income received from all sources in said year."
Under date of December 9, 1924, an income and profits tax waiver was executed, whereby the parties thereto consented to extend the period prescribed by law for a determination, assessment and collection of the amount of income, excess profits, or war profits taxes due under any return made by or on behalf of the Skaneateles Paper Co. for the year 1917. This document was signed "Skaneateles Paper Company by Oswego Falls Corporation, Its Successor by Consolidation, H. L. Paddock, Prest." and by the respondent, and contained the following statement:
This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period of one year after the expiration of the statutory period of limitation within which assessments of taxes may be made for the year or years mentioned, or the statutory period of limitation as extended by section 277 (b) of the Revenue Act of 1924, or by any waivers already on file with the Bureau.
An income and profits tax waiver, dated January 26, 1925, was executed with substantially the same signatures as the waiver last above mentioned, and provided that the time within which assessment of income and profits taxes of the Skaneateles Paper Co. might be made for the year 1917 should be extended to December 31, 1925.
An income and profits tax waiver dated November 25, 1925, bearing substantially the same signatures as the last two preceding instruments, provided for the further extension to December 31, 1926, of the time within which assessment might be made of the income and profits tax liability of the Skaneateles Paper Co. for the year 1917.
By notice dated February 15, 1924, the Skaneateles Paper Co. was advised that the respondent had determined an additional tax liability against it for the year 1917 in the amount of $25,302.18, and, in order that collection thereof might not be jeopardized by the delays incident to giving the usual 30-day notice, an immediate assessment would be made, but that a claim in abatement would be entertained. This amount was assessed by the respondent on March 14, 1924, and a claim in abatement was filed on March 26, 1924. On October 30, 1924, and again on November 28, 1925, conferences were held between attorneys for the taxpayer and the respondent respecting the correctness of the additional tax so assessed.
Under date of December 5, 1925, the respondent addressed a notice to the Skaneateles Paper Co. stating that a deficiency in its tax liability for the year 1917 had been determined in the amount of $545.20, and further stating that an appeal contesting the correctness of the determination might be filed with this Board within 60 days from the date of mailing of the notice. It was further stated in the notice that the claim for abatement of $25,302.18, covering the year 1917, would be rejected in full.
Before the expiration of the 60-day period for appeal and before an appeal was filed, respondent addressed a letter to the company under date of January 12, 1926, in reply to a request that its profits tax for 1917 be computed under section 210 of the Revenue Act of 1917, stating that the provisions of the notice of December 5, 1925, might be disregarded.
Thereafter, the 30-day notice of April 24, 1926, and the 60-day notice of September 29, 1926, hereinabove referred to, were mailed by the respondent to the paper company. They were duly received by the Oswego Falls Corporation, and within 60 days from the date of the last mentioned notice the appeal in this proceeding was filed.
The Oswego Falls Pulp & Paper Co. operated a paper mill at Fulton, New York. A majority of the capital stock of that corporation, as well as that of the Skaneateles Paper Co., was owned by one Forest G. Weeks and members of his family. About the year 1911 the Oswego Falls Pulp & Paper Co. purchased from Weeks a paper mill, known as the Draycott Mill, for $35,000, and it was turned over to the Skaneateles Paper Co. to operate. Amounts spent by the latter company in the operation of the Draycott Mill and for improvements thereto were treated by it as advances to the Oswego Falls Pulp & Paper Co., and were carried on the books of the Skaneateles Paper Co. in an account receivable. In February 1914 the Oswego Falls Pulp & Paper Co. sold the Draycott Mill to the Skaneateles Paper Co. for $35,000, plus the cost of operations and improvements, amounting to $52,237.29, or a total of $87,237.29. The Skaneateles Paper Co. gave its promissory notes of the face value of $35,000 to the Oswego Falls Pulp & Paper Co. in part payment for the property. No payment was ever made on the notes, and on April 30, 1915, they were canceled by the Oswego Falls Pulp & Paper Co.
The petitioner suggests in its brief that we are without jurisdiction in this case because of certain facts appearing in the record, to which reference will be made seriatim hereinbelow. No such question was raised in the pleadings, but since the jurisdiction of this Board is prescribed and limited by the statute, we deem it our duty, in all cases where the essential jurisdictional facts do not clearly appear from the record, to consider and determine first of all whether we do or do not have jurisdiction of the proceeding.
The first question of jurisdiction suggested by the petitioner arises from the following facts: (1) The deficiency notice of September 29, 1926, from which this appeal was taken, was addressed to "Skaneateles Paper Company, Skaneateles, New York," (2) which corporation had been consolidated with two other corporations on or about January 31, 1922, to form the Oswego Falls Corporation, and on that date the component corporations had been dissolved by operation of law, and (3) the petition filed with the Board was signed "Skaneateles Paper Company, By Its Sole Beneficiary Oswego Falls Corporation, of Fulton, New York, By S. C. Stiver, Secretary."
In Bowman Hotel Corp., 24 B.T.A. 1193, precisely the same jurisdictional question, arising from a parallel state of facts, was considered by us and decided in the affirmative. On authority of that decision we hold that, in so far as the point here considered is concerned, we have jurisdiction to...
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